RBI/2011-12/274
A.P. (DIR Series) Circular No. 52
November 23, 2011
To
All Authorised Dealer Category I Banks
Dear Madam / Sir,
External Commercial Borrowings (ECB) Policy – Parking of ECB proceeds
Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to
A.P. (DIR Series) Circular No. 26 dated October 22, 2008 relating to the
External Commercial Borrowings (ECB).
- At present, borrowers are permitted to either keep ECB proceeds abroad or
remit these funds to India, pending utilization for permissible end-uses. ECB
proceeds parked overseas can be invested in liquid assets, such as, deposits or
Certificates of Deposit or other products offered by banks ( rated not less than
AA (-) by Standard and Poor/Fitch IBCA or Aa3 by Moody’s), Treasury bills and
other monetary instruments of one year maturity having minimum rating as
indicated above and deposits with overseas branches / subsidiaries of Indian
banks abroad. The underlying principle is that funds should be invested in such
a way that the investments can be liquidated as and when funds are required by
the borrower. ECB funds may also be repatriated to India for credit to the
borrowers Rupee accounts with AD Category I banks in India pending utilization
for the permissible end-uses.
- Based on a review of the current macro economic conditions, it has been
decided that henceforth the proceeds of the ECB raised abroad meant for Rupee
expenditure in India, such as, local sourcing of capital goods, on-lending to
Self-Help Groups or for micro credit, payment for spectrum allocation, etc.
should be brought immediately for credit to their Rupee accounts with AD
Category I banks in India. In other words, ECB proceeds meant only for foreign
currency expenditure can be retained abroad pending utilization. The rupee
funds, however, will not be permitted to be used for investment in capital
markets, real estate or for inter-corporate lending, as hitherto.
- The amended ECB policy will come into force with immediate effect and is
subject to review. All other aspects of ECB policy would remain unchanged.
- AD Category - I banks may bring the contents of this circular to the notice
of their constituents and customers.
- The directions contained in this circular have been issued under sections
10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
are without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully,
(Rashmi Fauzdar)
Chief General Manager